Correlation Between NORTHEAST UTILITIES and Waste Management
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Waste Management at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NORTHEAST UTILITIES and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Waste Management, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Waste Management and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NORTHEAST UTILITIES with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Waste Management.
Diversification Opportunities for NORTHEAST UTILITIES and Waste Management
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NORTHEAST and Waste is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and NORTHEAST UTILITIES is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NORTHEAST UTILITIES are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Waste Management go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Waste Management
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the Waste Management. In addition to that, NORTHEAST UTILITIES is 1.22 times more volatile than Waste Management. It trades about -0.02 of its total potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of volatility. If you would invest 15,267 in Waste Management on August 30, 2024 and sell it today you would earn a total of 6,338 from holding Waste Management or generate 41.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Waste Management
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Waste Management |
NORTHEAST UTILITIES and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Waste Management
The main advantage of trading using opposite NORTHEAST UTILITIES and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Waste Management can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Waste Management will offset losses from the drop in Waste Management's long position.| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Superior Plus Corp | NORTHEAST UTILITIES vs. SIVERS SEMICONDUCTORS AB |
| Waste Management vs. Apple Inc | Waste Management vs. Apple Inc | Waste Management vs. Superior Plus Corp | Waste Management vs. SIVERS SEMICONDUCTORS AB |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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